Germany's economy is officially in recession, according to first quarter growth figures published by the Federal Statistical Office on Thursday. File photo by Hayoung Jeon/EPA-EPE
May 25 (UPI) -- Germany's economy contracted for the second-straight quarter in the January to March period, meaning the world's fourth-largest economy officially meets one definition of a recession, figures published Thursday by the country's main statistical agency show.
Gross Domestic Product unexpectedly declined by 0.3% in the first quarter on top of a 0.5% fall in the fourth quarter of 2022, according to the latest economic report from Destatis, the Federal Statistical Office, which said economic performance had been hit by the impact of high prices on consumer spending and sharp government cuts.
"After GDP growth entered negative territory at the end of 2022, the German economy has now recorded two consecutive negative quarters," said Ruth Brand, President of Destatis, which as recently as last month had forecast that first quarter growth would be flat, avoiding a recession.
An adjusted 1.2% fall in household expenditure in the quarter under the burden of continuing high prices weighed on the economy with people cutting back spending on food and drink, clothing and footwear, and furniture compared with the October to December.
New car sales were also down but the statistical office said the fall was due, in part, to changes to grants toward purchases of green vehicles at the beginning of the year when help for purchases of plug-in hybrids was cut and the subsidy for electric cars was scaled back.
Government spending plunged by 4.9% compared with the previous quarter, but the fall was mainly attributable to the phasing out of state-financed COVID-19 measures, such as vaccinations and testing, which had reached a record high at the start of 2022 amid efforts to combat the Omicron wave.
Investment, however, jumped following a weak second half of 2022, led by gross fixed capital formation in construction which rose by 3.9% compared with the fourth quarter and machinery and equipment which climbed by 3.2%.
Plastics and fabricated metal products helped push goods and services exports up by 0.4% compared with the October to December quarter while imports were almost 1% lower, partially because of reductions in imports of crude oil and mineral oil products and chemicals and chemical products.
Germany's economic stagnation is also weighing on the eurozone bloc it leads with the 20-member group of countries growing by just 0.1% in the first quarter even as its other major economies -- France, Italy and Spain -- rebounded into the black from the fourth quarter of 2022.